How to Take Control of Retail Fundamentals Ahead of Peak Season

02.10.2022Ed. Note: This article was previously published at Points of contact in retail.

Heading into the high season of 2022, everything old is new again. Nostalgia is en vogue in television, film, music and fashion, reviving old trends and creating new ones. At the same time, retailers are reminiscing about a time in the not-so-distant past when overstocking was considered an unforgivable sin. In traditional retail, you always want to minimize your inventory carrying costs to avoid paying for something you may not be able to sell. This is especially true ahead of the important holiday season, as peak sales can meet or exceed annual targets.

But amidst today’s supply chain issues, inflation and volatile consumer demand, many retailers find themselves in the opposite scenario with excess inventory. There are actually two ways to address this dilemma: slash prices sharply, like some big department stores are doing, or manage excess inventory by storing it away until demand picks up. Retailers and e-commerce brands often find that profit margins are negatively impacted by a strategy that targets deep discounts, so managing excess inventory is typically a cheaper approach. But it’s still a new challenge to an old problem — not being able to correctly forecast inventory demand.

In an ideal world, no retailer would end up with excess inventory because they would have the right insights to understand where and when their product needs to be fulfilled most urgently. To do this, you need to both fall back on retail fundamentals and update your tech stack, e.g. B. With Radio Frequency Identification and other Internet of Things solutions, you can implement these best practices in preparation for the most lucrative shopping season of the year.

Excess inventories reduce profits

Excess inventory can quickly become a bigger problem for retailers and the brands they carry. First, it can cost a lot to store that extra supply, especially when storage space is tight. Second, retailers’ profit margins shrink as inventories are reassessed. As a result, the value of goods is falling, as Joseph Malfitano, founder of turnaround and restructuring firm Malfitano Partners, explained in a recent CNBC article.

This has the secondary effect of potentially reducing a company’s credit base. If the trend continues into 2023, we could see more retailers file for bankruptcy, leaving brands in a bad spot. While many are struggling with excess inventory, the trend has publicly impacted the business of some of the biggest chains. For many of these retailers, turning a profit in 2022 means beating expectations in the fourth quarter holiday season, with many turning to e-commerce to spur consumer spending.

Take control with technology-enabled end-to-end supply chain management

Those that change their inventory management to prevent the situation in the future will endure regardless of macroeconomic factors or shifts in consumer preferences and demand. Modern e-commerce and retail brands are reinventing their playbooks, moving away from nostalgic but outdated strategies and instead turning to technology-enabled fulfillment solutions, including RFID, that can unlock the visibility and insights needed to accurately meet demand to anticipate and allocate inventory correctly.

Not only do these solutions provide the ability to manage excess inventory, but they also provide the integration and connectivity needed for a holistic view of orders, inventory and fulfillment activity across channels and warehouses, centralizing all supply chain schemas a place. With real-time visibility and predictive analytics based on current and historical insights, brand owners can make better inventory forecasting, purchasing and allocation decisions to optimize sales for the short-term peak season and into the future.

Better inventory forecasts = happier customers

The move towards technology-enabled fulfillment via RFID and other innovations not only reduces the likelihood of overstock and lowers costs, but also increases customer satisfaction and encourages repeat purchases. Armed with up-to-the-minute information on stock levels and how and when orders are being fulfilled, brands can better communicate with their customers and proactively notify them of any delays or changes before they inquire – important as the majority of shoppers say they prefer delivery delays to a poor customer experience and that they will not buy from a retailer again after receiving an inferior shipment.

Retailers struggling with excess inventory will continue to grab the headlines as the bullwhip effect that started last holiday season extends into this year. With the right inventory management and fulfillment technology, both retailers and the brands within them will modernize their operations and soon remember misalignments that are a thing of the past.

Ben Eachus is the co-founder and CEO of Flowspace, the software that powers ecommerce fulfillment for brands. Eachus was an early hire at The Honest Co., where he led supply chain and scaled the company’s distribution and fulfillment network during a period of rapid growth prior to the IPO. Previously, he ran the fulfillment operations at McMaster Carr, a leading industrial supplies distributor specializing in same-day delivery.